Magazine

Online Extra: Nailing the Shifts

December 24, 2006

It has been a year since UMB Asset Management's Bill Greiner won BusinessWeek's Fearless Forecast of the equity markets, an annual contest among scores of equity strategists across the country—and this year nobody came closer than Greiner did in 2005. On average, the 52-year-old chief investment officer predicted the Dow Jones industrial average, the Standard & Poor's 500-Stock Index and the Nasdaq Composite within an astonishing 0.5% of their actual yearend levels. Not even this year's winner came that close to pegging the markets.

This year, Greiner fell back in the pack. His forecast of 11,700 on the Dow was about 5% shy of actual levels on Dec. 6, when we called the contest. He also fell short on the S&P by about 5% and on the Nasdaq by less than 4%. Though his numbers proved "a little too bearish," he says the markets basically played out as he anticipated, with a weak start and a mid-year rebound, spurred by a halt in rising interest rates.

"We got the directional shift during the year, which I think is a very difficult thing to get right, and our large-cap bias worked out well for us and our clients," he says. Large-cap stocks, which did well toward the end of the year, play an integral role in UMB's macro strategy, he says.

Watching the Weather A Kansas native who graduated from Washburn University in Topeka, Greiner joined UMB six years ago. He recently told clients to expect a robust market during the first half of 2007 and a "questionable" environment during the second half. In other words, "clear skies but clouds forming on the horizon," he says.

The so-called clouds refer to the possibility of a recession if consumer spending slows in 2007. "Economic expansion is going on its 55th month, and normally speaking, we start running into troublesome excesses past the four- or five-year frame, which is where we are right now," Greiner says. That's not to say there won't be gains. It's just that most of these will occur in the first half of the year, he says.

Looking ahead, Greiner is bullish on technology stocks. He predicts a yearend Dow of 13,100, an S&P finish of 1,525, and 2,600 on the Nasdaq. Of course, he says he would rather nail the shifts in market direction than pinpoint the actual numbers. "As far as returns are concerned, that's how people make money or keep from losing money," he says.

Then again, "unprecedented second win" has a nice ring to it, doesn't it? By Bremen Leak